Published 4:00 am, Thursday, January 30, 2003

Sen. Barbara Boxer said Wednesday she would propose closing "a giant tax loophole for giant SUVs" that allows small businesses to deduct up to $25,000 from the price they pay for such vehicles as Cadillac Escalades, Lincoln Navigators and tank-like Hummers. President Bush has proposed expanding the tax write-off to $75,000 as part of his tax cut proposals he says are designed to stimulate the economy.

And Sen. Dianne Feinstein plans today to reintroduce a proposal to force SUVs and light trucks to meet the same fuel efficiency standard of 27.5 miles a gallon that passenger cars will have to meet over the next nine years.

The president calls for increasing the average mileage requirement for SUVs by 1.5 miles a gallon, to 22.2 miles per gallon by 2007.

Feinstein's proposal, which died last year in the Senate, and Boxer's plan are likely to face a difficult struggle to passage in the Republican- controlled Congress.

CARS SOLD

The popularity of SUVs, which together with pickups and minivans account for more than half of the new motor vehicles sold in California, has prompted a backlash. They're gas guzzlers when the idea of U.S. energy independence is coming back into vogue, and as the Boxer and Feinstein proposals show, SUVs don't have to play by the same rules as cars such as the Honda Accords, Ford Escorts or the trendy hybrid Toyota Prius, a gas-electric vehicle that carries its own small tax write-off.

"By allowing oversized SUVs to get the same deduction as trucks and vans, the tax code is discouraging the purchase of more fuel-efficient vehicles," Boxer said.

Her proposal addresses an old provision of the tax code that was intended originally to help farmers or construction companies. The rules provided that small businesses buying vehicles weighing more than 6,000 pounds could deduct $25,000 of the purchase price. This wasn't much of a problem until the behemoth SUVs hit the road, with some luxury models sporting price tags of more than $100,000.

HUMMERS

The lightest Hummer, the two-door hard top, weighs in at 6,500 pounds.

Now, businesses have an incentive to buy such vehicles because the tax write-offs bring their prices down to those of ordinary mid-range passenger cars.

Bush's proposal to raise the write-off is part of a much broader plan to help business by raising deductions to $75,000 for most purchases, such as new office furniture or computers.

"These SUVs are not a cheap thing," said Dena Battle, legislative director of the 600,000-member National Federation of Independent Businesses. "Our feeling is that we want the restriction eliminated on cars under 6,000 pounds. That would remove the incentive for people to buy vehicles over 6,000 pounds.

"We'd rather provide incentives for our members to buy smaller vehicles that are more fuel efficient and are probably what they want anyway."

RULES

Battle also warned businesses that are mulling the purchase of a big SUV about the Internal Revenue Service's enforcement policies. Internal Revenue Service rules require that a vehicle be used for business a minimum of 50 percent of the time before a deduction can start to be taken. The write-off increases the more the vehicle is used for business, she said, and the IRS can be sticky about enforcing the rule.

Taxpayers for Common Sense, a Washington watchdog organization, estimates that Bush's proposal to expand the SUV tax provision could cost the federal treasury $840 million to $987 million for every 100,000 vehicles sold to businesses.

The fuel efficiency battle has been going on for years. Feinstein's proposal, which she will make with Sen. Olympia Snowe, R-Maine, didn't get anywhere in the last Congress.

Feinstein said the plan to raise fuel efficiency standards on SUVs would save the country 1 million barrels of oil daily, shave 10 percent off oil imports and prevent 240 million tons of carbon dioxide emissions from entering the atmosphere and contributing to global warming.

Feinstein has said Bush's proposal "is a start. They can do a lot better."

"Global warming is quite real, and the biggest contributor is the automobile," she added.